Personal Finance Advice - How to Avoid Bankruptcy and Still Reduce Your Debt

Personal Finance Advice - How to Avoid Bankruptcy and Still Reduce Your Debt

Many consumers like to use bankruptcy as a form of debt relief. Yes it does technically get you relief from your debts, but not in the way you hoped. There are a lot of downsides to declaring bankruptcy. Most important is the low credit score you get for about seven years and the impact it will have on you being able to secure financial lending in the future. But wait! If bankruptcy isn't such a good idea, what are your other alternatives? If you want to reduce your debt, consider settlement.

Debt settlement enables you to get some of your debt reduced. This reduction amount will vary from person to person. The general rule of thumb is that if you enroll in a debt relief program to let the professionals do the negotiations and if you owe more than $10,000 you should see at least a 40% reduction in debt, but even 50% if very common. So while your balance sheet might not be completely cleared, you can go from owing $40,000 to $22,000 or something along the same lines.

As great as it is to hear that you will get a chunk of your debt eliminated with settlement, what exactly is it that makes it so much better than bankruptcy? It is important to look at the reduction of debt. You aren't able to walk away from all your debts free and clear; you still need to pay some of it. This works in your favor when it comes to your credit score or obtaining financing in the future. Yes, you didn't pay all your bills on time or in full, but remember that you did pay a percentage of them which is better than nothing.

As for the impact on your credit score, you might notice a lower score for a couple of years. The key though is to remember that you got a percentage of your debt reduced. Lets say that you originally owed $55,000 and your creditors accepted a settlement offer of $30,000, that is $15,000 you are saving and that is a lot of money. The tradeoff (the lower score for the saved money) is worth it in this case. Moreover, if you ever need to secure financing from a financial lender, point out the fact that you did pay most of your debts if that issue is brought up by a loan officer.

In short, you can declare bankruptcy if you want to because it is your decision. With that said, it is important to remember that the debt relief procedure referred to as settlement or reduction is a wise choice with many benefits and less consequences.

Debt settlement is a viable alternative to filing bankruptcy. Most consumers are able to eliminate at least 60% of their unsecured debt while avoiding many of the negative consequences with filing bankruptcy. If you are over $10k in unsecured debt you will be eligible for debt settlement. To locate legitimate debt settlement companies in your state check out the following link:

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